Indonesia's 'consuming class' grows

20 January 2014

JAKARTA: International brands should take note of evolving consumer trends in Indonesia, consultancy McKinsey has advised, and recognise that the country's growing consuming class is driving growth in e-commerce and product categories.

In its second survey of more than 5,500 consumers across 44 cities and rural areas, McKinsey identified 70m Indonesians as a "consuming class" who are optimistic about their future and increasingly sophisticated about their spending choices.

As they include 15m rural people who live near large urban areas and have adopted similar attitudes as city-dwellers, McKinsey advised brands not to neglect them.

The exponential growth of the country's young urban population is another key factor for brands seeking to expand in the developing market.

After growing by 138m people over the last 13 years, Indonesia's urban population is expected to reach 209m by 2030, by which time urban areas will also account for 86% of the nation's GDP.

In a third key finding, McKinsey predicted that the retail sector will become more fragmented as convenience stores make inroads into traditional outlets, such as the country's dominant "warung" family stores.

Despite these signs that modern retailing habits are being adopted, the report warned that Indonesians remain wary of online shopping amid concerns about safety, unreliable quality and poor sales support.

A final key finding for international brands to consider is the pride and trust Indonesian consumers place in domestic companies.

The survey revealed that Indonesian brands are trusted more than their foreign counterparts to deliver value for money and to show a better understanding of local preferences.

Nonetheless, foreign brands could still benefit by acquiring local companies, the report argued, or by adopting a stronger local identity.